Wal-Mart cuts spending, supercenter plans

NEW YORK (Reuters) - Wal-Mart Stores Inc cut its capital expenditure forecast on Tuesday and scaled back on planned supercenters as the world's largest retailer grapples with slowing sales in a saturated U.S. market.

Wal-Mart said its capital spending will fall this year and probably the next two fiscal years as it spends less on new U.S. stores, but spending on new international stores will increase and it will forge ahead with U.S. store renovations.

Wal-Mart's shares fell almost 3 percent as the pullback was not as extensive as some on Wall Street had expected and investors fretted that the retailer was diluting efforts to boost sales at existing U.S. stores -- which last year rose at their lowest pace on record -- by investing too much overseas.

"Wal-Mart was trying to please both value investors and growth investors, and at least for today wasn't able to really do either," said David Abella, a portfolio manager at Rochdale Investment Management, which owns Wal-Mart shares.

Abella said some investors would have preferred that Wal-Mart used excess cash to boost dividends or fund share buybacks instead of saying on Monday that it would spend up to $878 million to buy out minority shareholders in money-losing Japanese supermarket unit Seiyu Ltd.

PUSHING FOR A PULL BACK

Analysts and investors have been pushing Wal-Mart to rein in U.S. expansion plans as sales at existing stores, known as comparable store sales, have slowed and it has saturated many markets. As of September 30, Wal-Mart operated 4,114 U.S. stores.

Wal-Mart said in June that it would cut the number of supercenters it plans to open, but that has yet to translate into improved U.S. sales.

For the first eight months of this fiscal year, which started on February 1, comparable sales at U.S. stores were up just 1.5 percent, compared with a year-earlier gain of 2.6 percent.

Wal-Mart also said on Tuesday it expects sales growth of 5 percent to 8 percent for the fiscal years ending in early 2009 and 2010 -- down from a rise of roughly 9 percent this year.

To counter slowing sales, Wal-Mart is again pulling back on building U.S. supercenters, which combine its discount store format with grocery stores.

For the fiscal year beginning next February 1, Wal-Mart will open 170 supercenters, compared with 195 this year. It now plans to open 140 supercenters in the fiscal year after that - down from 170 it had planned originally.

"One should expect approximately 140 supercenters per year after that," Chief Financial Officer Tom Schoewe said on a conference call with reporters.

For the current fiscal year, Schoewe forecast capital spending of $14.7 billion to $15.4 billion. That is down from June, when it cut its spending estimate to $15.5 billion from $17 billion because it planned to open fewer supercenters.

For its next two fiscal years, Wal-Mart forecast capital expenditures of $13.5 billion to $15.2 billion.

MORE CAPEX CUTS

While capital expenditures for new stores and warehouse clubs in the United States should be $6.7 billion to $7 billion this fiscal year, that figure should fall to $4.5 billion to $5 billion by the fiscal year that ends in early 2010.

But Schoewe said Wal-Mart will still put money toward store remodeling, with spending forecast at $2.1 billion this year, and $2.2 billion to $2.4 billion in the next two fiscal years.

As part of its U.S. strategy, the retailer, which has been cutting prices on thousands of items, also plans to add new brands, including two new home decor lines, as well as expand its $4.00 generic drug program.

Wal-Mart expects square footage growth of about 6 percent for the current fiscal year. For its fiscal years ending in early 2009 and 2010, it expects square footage growth of about 5 percent to 6 percent, excluding any acquisitions.

In June, it said it expected a consolidated square footage growth rate of about 6 percent this fiscal year and next.

Wal-Mart shares closed down $1.32 at $43.93 on the New York Stock Exchange.